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What taxes are payable when a Maryland resident dies?
A:
Both the federal and state governments impose taxes upon the property of a decedent. A federal estate tax with graduated rates is imposed on all property interests that the decedent owned at the time of death. The federal estate tax applies not only to probate assets, but also to such non-probate assets as joint property and insurance proceeds. In 2010 there is no federal estate tax. In 2011, the tax would reappear with an exemption of $1,000,000. However, it is likely that Congress will soon enact legislation to change the federal estate tax law and exemption amounts. Due to this uncertainty, it is especially important to have proper estate planning.
An estate may be subject to Maryland estate tax if the value of the assets exceeds $1,000,000. A properly drawn will can reduce federal and Maryland estate tax substantially.
Maryland imposes an inheritance tax on probate property, joint property, and certain other property. There is no inheritance tax on assets passing to exempt charities, a spouse, child (which includes a stepchild or former stepchild), other lineal descendant (grandchild, great grandchild, etc.), parent, stepparent, brother, sister, son-in-law, daughter-in-law, or the spouse of other lineal descendants. Inheritance tax at the rate of 10 percent will be assessed if the recipient is a niece or nephew, a more distant relative or a non-relative.